Fw: Idea Cellular: Renewed vigour - BUY

 

Annual Report Analysis: Idea Cellular: Renewed vigour - BUY Idea enters a crucial period over the next 12-18 months as it seeks to renew nine licenses in the crucial 900MHz band even as FY14 performance and recent fund raising gives us confidence about its renewal capabilities. Idea ticked all the right boxes in the year gone by with 18% revenue growth, ~480bps margin expansion and 100bps increase in revenue market share. Blended (2G+3G) data volumes increased ~112% in FY14 and even though pricing/MB declined, data share of non voice revenues grew 350bps yoy through the year (and a further 140bps in Q1 FY15). Operating cash flow jumped ~86% yoy on doubling of pretax profit and easing of working capital cycle. However spectrum purchases in Feb auctions plus FY14 capex led to negative free cash flow for the year; as a corollary net D/E inched up to 1.3x to provide for the deferred spectrum payment liability. Overall license renewals remain the key near term risk but we remain optimist on Id! ea's ability to fund spectrum purchases; retain BUY with unchanged 9-12mth target of Rs200.

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Warm Regards, Amar Ambani